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Organizational Culture
 Organizational Culture
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The set of shared values and norms that controls

organizational members’ interactions with each other and
with people outside the organization.

It has direct impact on the attitude and working behavior

and performance of the employees.

J. C. Spender- organizational culture is a belief system

shared by organization members

Deal and Kennedy- as the way we do things around here in

organization
3 Organizational Values?

 Values- general criteria, standards, or guiding

principles that people use to determine which type
of behaviors, events, situations, and outcomes are
desirable or undesirable

 Terminal Value: a desired end state or outcome

that people seek to achieve
 Instrumental Value: a desired mode of behaviour
 Terminal and Instrumental Values in an
4 Organization’s Culture
5 Norms

 Standards or styles of behaviour that are

considered acceptable or typical for a group of
people

 Specific norm of courteous and keeping the

work area clean- where values include being
helpful and working hard
 6 Organizational Culture
 Based on enduring values embodied in organizational
norms, rules, standard operating procedures, and goals
 People draw on these cultural values to guide their
actions and decisions when faced with uncertainty and
ambiguity
 Important influence on members’ behavior and
response to situations
 A country’s culture can affect the values and norms of
a company or a company’s culture
7 Organizational culture is a basic philosophy of
organization which consists of some core values,
beliefs and perceptions

Essence of organizational culture:

 Innovation and risk taking
 Attention to details
 Outcome oriented
 People orientation
 Team orientation
 Aggressiveness
 Stability
8 Characteristics of Organizational
Culture
 Values and beliefs
 Followed by all members
 Organizational culture may be implicit or explicit
 Organizational culture is dynamic in nature
 Communication of organizational culture
 Integration and coordination of individual actions
with group
 Cultural differences
9 Differences in Global Values
and Norms
 A country’s culture can affect the values and
norms of a company or a company’s culture
 Differences in communication styles,
attitude toward competing tasks, and
different approaches to decision making can
impact a company’s culture
 Executives working abroad need to be
sensitive to both the country’s culture and
the company’s culture
10 Recognizing Differences in Organizational
Cultures

 Many mergers between companies have failed

because of differences in their organizational cultures
 Merger teams now exist to help smooth the transition
between the two cultures
 How is an Organization’s Culture Transmitted
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to its Members?
 Socialization and Socialization Tactics
Socialization: the process by which members
learn and internalize the values and norms of an
organization’s culture

 Role orientation: The characteristic way in which

newcomers respond to a situation
Institutionalized role orientation
Individualized role orientations
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 Institutionalized role orientation: results when
individuals are taught to respond to a new context
in the same way that existing organizational
members respond to it

 Individualized role orientations: results when

individuals are allowed and encouraged to be
creative and to experiment with changing norms
and values
13 How Socialization Tactics Shape
Employees’ Role Orientation
 Collective vs. individual
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 Collective tactics: provide newcomers with
common learning experiences designed to produce
a standardized response to a situation
 Individual tactics: each newcomer’s learning
experiences are unique, and newcomers can learn
new, appropriate responses for each situation

 Formal vs. informal

Formal tactics: segregate newcomers from existing
organizational members during the learning process
Informal tactics: newcomers learn on the job, as
members of a team
 
15 Sequential vs. random
 Sequential tactics: provide newcomers with
explicit information about the sequence in
which they will perform new activities or
occupy new roles as they advance in an
organization
 Random tactics: training is based on the
interests and needs of individual newcomers
because there is no set sequence to the
newcomers’ progress in the organization
 Stories, Ceremonies, and Organizational
Language
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 Organization rites
Rites of passage: mark an individual’s entry
to, promotion in, and departure from the
organization
Rites of integration: shared announcements
of organizational success, office parties, and
cookouts
Rites of enhancement: public recognition
and reward for employee contributions
17 Where an Organization’s Culture Comes
From
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 Characteristics of people within the
organization
 Through a process of hiring people that match
existing culture and attrition, people become
more and more similar over time

 Organizational ethics
• The moral values, beliefs, and rules that
establish the appropriate way for organizational
stakeholders to deal with one another and with
the environment
Derived from the personality and beliefs of
the founder and top management
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Factors Influencing the Development of
Organizational Ethics
 PROPERTY RIGHTS
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 The rights that an organization gives to members to receive
and use organizational resources
 The distribution of property rights to different stakeholders
determines:
 How effective an organization is
 The culture that emerges in the organization
 Top managers are in a strong position to establish the terms
of their own employment and the property rights received
by others
 Changing property rights changes the corporate culture by
changing the instrumental values that motivate and
coordinate employees
 Strong property rights may harm the organization
21 Common Property Rights Given to
Managers and the Workforce
22 Where does Organizational Culture
come from? (cont.)
 Organizational structure
 Mechanistic vs. Organic
 Mechanistic – predictability and stability
are desired goals
 Organic – innovation and flexibility are
desired end states
 Centralized vs. Decentralized
 Decentralized – encourages and rewards
creativity and innovation
 Centralized – reinforces obedience and
accountability
23 Can Organizational Culture be
Managed?
 Changing a culture can be very difficult
 Hard to understand how the previous four
factors interact
 Major alterations are sometimes needed
 Some ways culture can be changed:
 Redesign structure
 Revise property rights used to motivate
people
 Change the people – especially top
management
24 Social Responsibility
A manager’s duty or obligation to make decisions that nurture,
protect, enhance, and promote the welfare and well-being of
stakeholders and society as a whole

 Approaches to Social Responsibility

 Obstructionist approach: The low end of the
organization’s commitment to social responsibility
 Defensive approach: Indicates a commitment to ethical
behavior
 Accommodative approach: The acknowledgment of the
need to support social responsibility
 Proactive approach: Actively embrace the need to behave
in socially responsible ways
25 Figure- Approaches to Social Responsibility
26 Why Be Socially Responsible?
 Workers and society benefit directly because organizations
bear some of the costs of helping workers
 Quality of life as a whole would be higher as a climate of
caring is encouraged
 It is the right thing to do
 Companies that act responsibly toward their stakeholders
benefit from increasing business and see their profits rise
 Whistle-blower: Informing (by an employee) an outside
person or agency, about an organization’s illegal or immoral
behavior
 Managers’ own ethics influence their behavior
 Their own values strongly influence whether they will
take a proactive approach to social responsibility
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Organizational design and strategy in a
Changing Global Environment

 Strategy: The specific pattern of decisions and

actions that managers take to use core competences
to achieve a competitive advantage and outperform
competitors

 Core Competences: skills and abilities in value

creation activities that allow a company to achieve
superior efficiency, quality, innovation, or customer
responsiveness.
28 Cyclical value creation process
29 Sources of core competences
Specialized Resources-
 Functional resources: skills possessed by an
organization’s functional personnel
 Organizational resources: attributes that give an
organization a competitive advantage such as the
skills of the top management or possession of
valuable and scarce resources, the vision of its
founder or CEO
30 Coordination abilities- ability to
coordinate its functional and organizational
resources to create maximal value

 Effective coordination of resources leads to

competitive advantage by means of:
Control systems
Centralization or decentralization of
authority
Development and promotion of shared
cultural values
31 Global Expansion and core
competences
 Global expansion allows an organization to create value for its
stakeholders

Fig: The creation of value through global expansion

 Global Expansion and
32 Core Competences

 Transferring core competences abroad

 Transfer core competence overseas to produce cheaper or
improved product
 Establishing a global network
 Establish value-creation activities in countries where
economic, political, and cultural conditions are likely to
enhance its low-cost or differentiation advantage
 Gaining access to global resources and skills
 Different countries have different resources and skills
that give them a competitive advantage
 Using global learning to enhance core competences
 Global activities provide access to knowledge that will
allow an organization to improve its core competences
 Four levels of Strategy
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 Functional Level Strategy: a plan of action to strengthen an

organization’s functional and organizational resources, as well
as its coordination abilities, in order to create core competences.
 Business Level Strategy: a plan to combine functional core
competences in order to position the organization so that it has a
competitive advantage in its domain.
 Corporate Level Strategy: a plan to use and develop core
competences so that an org. can not only protect and enlarge its
existing domain but can also expand into new domain.
 Global Expansion Strategy: a plan which involves choosing the
best strategy to expand into overseas markets to obtain scarce
resources and core competences.
34 Functional Level Strategy and Structure

 Strategies to lower costs or differentiate product

35 Functional Level Strategy and Structure
Organizational structure and culture are very important to the
development of functional level strategy
36 Functional Level Strategy and
Culture
Importance of Culture for functional- level strategy?
 A competitors can easily imitate another organization’s
structure but it is very difficult for a competitor to imitate
another organization’s culture, for culture is embedded in
the day-to-day interactions of functional personnel.
 To develop functional abilities and produce a core
competence, it is necessary to choose the property rights,
functional structure and functional managers that seem
most likely to enhance a function’s coordination ability.
37 Business Level Strategy
Strategies at the business level select and manage
the domain to which the organization uses its value
creation resources and coordination abilities to
obtain a competitive advantage.
38 Focus Strategy
 Another business level strategy
 Specialization in one segment of a market, and focusing
all of the organization’s resources on that segment
 Business-Level Strategy and Structure
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Business-Level Strategy and Culture

 Challenge is to develop organization-wide

values and specific norms and rules that allow
the organization to combine and use its
functional resources to the best advantage
Organizations pursuing low-cost strategy
must develop values of economy and
frugality
Differentiators must develop values of
innovation, quality, excellence, and
uniqueness
 41 Corporate Level Strategy

Corporate-level strategy: a plan to use and develop core

competences so that the organization not only can protect
and enlarge its existing domain but can also expand into
new domains

It is a continuation of business-level strategy because the

organization takes its existing core competences and
applies them in new domains.
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Vertical integration: a strategy in which an

organization takes over and owns its suppliers
(backward vertical integration) or its distributors
(forward vertical integration)

Related diversification: the entry into a new

domain in which it can exploit one or more of its
existing competences

Unrelated diversification: the entry into new

domains that have nothing in common with its core
domain
43 Corporate-Level Strategies for Entering
New Domains
 Corporate-Level Strategy and Structure
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 For organizations operating in more than one
domain, a multidivisional structure is appropriate
 Conglomerate structure and unrelated diversification
Conglomerate structure: a structure in which each
business is placed in a self-contained division and
there is no contact between divisions
 Corporate-Level Strategy and Structure (cont.)
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 Structures for Related Diversification

 Related diversification creates value by sharing
resources or transferring skills from one division to
another
 Requires lateral communication between divisions as
well as vertical communication between divisions and
headquarters
 Integrating roles and teams of functional experts are
needed to coordinate skills and resource transfers
 Multidivisional structures or matrix allow for the
coordination needed
46 Corporate-Level Strategy and Culture

 Cultural values and the common norms, rules, and goals

that reflect those values can greatly facilitate the
management of a corporate strategy
 Organizations need to create cultures that reinforce and
build on the strategy they pursue
 47 Implementing Strategy Across Countries

 Global expansion strategy: a plan that involves choosing the

best strategy to expand into overseas markets to obtain scarce
resources and develop core competences
 Four principal strategies
 Multi domestic strategy: oriented toward local
responsiveness by decentralizing control to subsidiaries and
divisions in each country
 International strategy: decentralization of all value-creation
functions except for R&D and marketing
 Global strategy: oriented toward cost reduction, with all the
principal value-creation functions centralized at the lowest-
cost global location
 Transnational strategy: some functions are centralized, while
others are decentralized at the global location best suited to
achieving these objectives to achieve both local
responsiveness and cost savings
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Choice of structure and control systems for managing a
global business is a function of:

 The decision of how to distribute and allocate

responsibility and authority between managers at
home and abroad so that effective control over a
company’s global operations is maintained

 The selection of the organizational structure that

groups divisions both at home and abroad in a way
that allows the best use of resources and serves the
needs of foreign customers most effectively

 The selection of the right kinds of integration and

control mechanisms and organizational culture to
make the overall global structure function effectively
 Strategy-Structure Relationships in the
49 International Arena
 Global Geographic Structure for Multi Domestic
50 Strategy
 Global Product Group Structure for International and
51 Global Strategies
 Global Matrix Structure for Transnational
52 Strategy